Definition of Cognitive Biases

Cognitive bias is a decision-making error where an individual takes decisions according to the information it perceives and interprets from its surroundings. Decisions made on cognitive biases are based on the experience of the individual rather than on the actual facts and figures.


In strategic management, cognitive biases have a great impact on the decisions of the managers and they have to tackle it. Managers are considered as goal-oriented, capable to take decisions, and have an influence on others. They may develop cognitive biases on the kind of experience they have and that is also reflected in their strategic decisions. Their past hypothesis and limited thinking, availability of limited options to choose, insensitivity to the outcomes from the decisions can cause this decision-making error on top-level management.

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